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Devastation from government ordered shutdown of the economy – 3 of 3

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What the California economy might look like by the time it is allowed to reopen. Photo of abandoned farm in North Dakota by James Ulvog.

This is the third in a series of posts describing the damage caused by shutting down the economy. First post discussed recent news on economic damage. Second post described ongoing health damage.

Some things are *not* going wrong

Just under half a million people attended the motorcycle rally in Sturgis, South Dakota from August 7 through 16.

9/1/20 – PJ Media – OH THE HORROR! Sturgis Motorcycle Rally COVID-19 Numbers Are in and They Are Shocking

Half a million. Official tally is 462,000.

In one small town.

Check out any of the pictures from the rally and you will notice a distinct lack of masks and social distancing.

Expectations in most media sources were for this event to produce massive amounts of infection.

Half a million people. In one town.

The tracking results are in from the massive numbers of people who were infected and the resulting fatalities from this massive event.

It is shocking. Amazing. Head-shaking. Astounding.

Best info available is that:

  • 196 people tested positive for COVID with results linked to attending Sturgis.
  • 4 people died.

To put that in context, 5 people died of motorcycle accidents in Sturgis during the rally.

Growing awareness something is wrong with lockdowns

8/24/20 – Wall Street Journal – New Thinking on COVID Lockdowns: They are Overly Blunt and Costly – Article has a massive amount of information on the course of the pandemic, wide range of strategies by national and state governments, and large volume of statistics. The story is told basically scrambled egg style with no pattern or trends or storylines that I can easily summarize.

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Written by Jim Ulvog

September 4, 2020, 7:05 am at 7:05 am

Devastation from government ordered shutdown of the economy – 2 of 3

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What the California economy might look like by the time it is allowed to reopen. Photo of abandoned farm in North Dakota by James Ulvog.

This is the second in a series of posts describing the damage caused by shutting down the economy. See previous post for economic damage.

Damage to health across a society

8/18/20 – British Office for National Statistics – Coronavirus and depression in adults, Great Britain: June 2020

Study by the British organization compared data from July 2019 to June 2020.

They found 19.2% of adults were experiencing depression in June 2020 compared to 9.7% in July 2019. That is a doubling as a result of the pandemic.

Severity of the rise can be seen by 6.2% of the population that had ongoing depression, 12.9% developed moderate to severe depression during the pandemic, and 3.5% some improvement during that time.

Is there any doubt that the overwhelming portion of that increase is due to the isolation and economic damage caused by the government ordered shutdowns?

An interesting exercise is to put that data into table as follows:

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Written by Jim Ulvog

September 2, 2020, 7:05 am at 7:05 am

Devastation from government ordered shutdown of the economy – 1 of 3

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What the California economy might look like by the time it is allowed to reopen. Photo of abandoned farm in North Dakota by James Ulvog.

Over the last several weeks I have accumulated a number of articles describing the economic and health damage caused by the government ordered shutdown of the economy.

I’ve been wanting to post these for a while. In light of the California government imposing more severe constraints on when the economy will be allowed to start functioning again, it is now time to publish.

Economic damage

7/30/20 – Wall Street Journal – US Economy Contracted at Record Rate last Quarter; Jobless Claims Rise to 1.43 million – The preliminary estimate of the collapse in the US economy for the second quarter came in at an annualized 32.9% drop. Again, that is annualized. In addition, it will be revised in each of the next two months as additional data is gathered by the feds.

That follows an annualized drop of 5% in the first quarter.

8/25/20 – CNBC – American Airlines to cut 19,000 jobs when federal aid expires in OctoberRead the rest of this entry »

Written by Jim Ulvog

September 1, 2020, 11:05 am at 11:05 am

Number of new unemployment claims rises for week of 8/15/20, but new jobs continue to exceed new losses.

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Unemployed business people. Image courtesy of Adobe Stock.

For the first time since 4/4/20, the number of new claims for unemployment increased for the 8/15/20 reporting date. Oddly, the increase of 109K is small for the time of pandemic but would be equal to about 4 weeks of new claims before the pandemic hit.

As I continue to sort out what this means, I’ll continue giving the same stats as provided for recent weeks.

Since the middle of June, which is when I started tracking this metric, the number of new jobs has exceeded the newly lost jobs by 5 million.

Looks to me like these stats suggest the economy is recovery, but at a slow pace, with unprecedented numbers of people still out of work at the same time as an extremely high number of new claims for unemployment are still rolling in.

 

The number of people drawing unemployment the number of new claims, and the resulting number of new jobs:

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Written by Jim Ulvog

August 25, 2020, 8:39 am at 8:39 am

Posted in Economics, Other stuff

Headline unemployment rate drops by two percentage points in June 2020.

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Wow, I sure don’t understand what is happening.  The headline unemployment rate declined 2.2% in June. That is a big drop.

At the same time, new claims for unemployment were 6.01 million for the four weeks ending 6/27/20. See previous post: New unemployment claims barely decline in week ending 6/27/20.

(How to put that information together? Well, the reason I’m blogging is to put my thoughts into writing, which forces me to think deeper in order to sort out what is going on around me.)

The U-3 unemployment rate in last four months with change from previous month:

march        4.4
april      14.7      10.3
may      13.3      (1.4)
june      11.1      (2.2)

 

That is a 2.6% drop in two months after a 10.3% rise in April.

Wow.

Graph above shows key unemployment rates since the start of 2019.

This discussion will be posted at several of my blogs.

For longer term perspective, consider the rates since before the Great Recession:

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Written by Jim Ulvog

July 2, 2020, 9:51 am at 9:51 am

Posted in Economics, Other stuff

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New unemployment claims barely decline in week ending 6/27/20.

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Image courtesy of Adobe Stock.

New unemployment claims for week ending 6/27/20 were 1.427M, down slightly from 1.480M the previous week. That is five weeks of between 1.4M and 1.9M following ten weeks of between 2.1M and 6.9M new claims.

The impact of new claims is mitigated by the number of people getting rehired which leads to the calculation of ongoing payments for unemployment.

  • 20.29M revised down from 20.5M- 6/13/20
  • 19.23M revised down from 19.52M – 6/20/20
  • 19.29M – 6/27/20 (a rare and exquisitely unexpected typo refers to this as the 6/20 week)

That shows the number of people finding new jobs is running higher than the number of people losing their jobs.

This discussion will be posted at several of my blogs.

My tally of data:

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Written by Jim Ulvog

July 2, 2020, 9:44 am at 9:44 am

Posted in Economics, Other stuff

Economic destruction from lockdown continues to expand.

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There is severe danger that a growing number of businesses are going to look like this over the next few months. Abandoned Safeway store [01] by Ben Schumin is licensed under CC BY-SA 2.0

Going concern thoughts for accountants:  I have stopped cross posting all my comments on the pandemic to this blog. The focus here is accounting and attestation issues.

The following conversation is worth listing here, so you can bring into consideration what is going on in the broader economy as you ponder your client’s going concern assessments. The economic damage from the shutdown is an issue for audits, reviews, and comps.

You might pay particular attention to comments by  the Atlanta Fed on near-term GDP forecasts.

 

The damage from the lockdown is spreading. More news is emerging about the devastation that took place in just the first full month of the closure.

The damage will continue to grow the longer the shutdown continues. At some point it will start compounding, growing at a faster rate out of proportion to the time that is passing. Keeping the economy closed now is unnecessarily so the compounding damage is a choice.

Merely a few of the articles in recent days:

  • Guess on GDP shrinkage in next quarter
  • Disproportionate number of poorer households hit by job losses
  • Collapse of tax revenue in New York state
  • Collapse of home sales in Southern California
  • Another retail chain announce store closures and another announces liquidation

It is imperative to reopen the economy in full, not just for ‘curb-side delivery.’ If we don’t open soon, I fear the following articles will be mild in comparison to what we will see in the future.

This discussion will be posted on several of my blogs.

5/16/20 – Fox Business – US GDP could sink over 40%: Atlanta Fed – Federal Reserve Bank of Atlanta is forecasting a 42.8% drop in GDP for the second quarter of  2020.

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Written by Jim Ulvog

May 22, 2020, 9:24 am at 9:24 am

U-3 and U-6 Unemployment rate.

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For a number of years I have been tracking the monthly unemployment data. That information is shown in the graph above. Included is monthly information back to April 2010. Prior to that I only picked up a few data points.

This graph shows the hit from the Great Recession and the painfully slow recovery which followed.

This discussion will be posted on several of my blogs.

Six different ways to measure unemployment

There are actually six different ways to calculated labor underutilization, all provided by the US Bureau of Labor Statistics. The economic devastation caused by the shutdown of the US economy means we need to start looking at these different indicators.

The above graph shows what is referred to as the U-3 and U-6 rates.

“What in the world are you talking about,” I hear you ask.

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Written by Jim Ulvog

May 9, 2020, 11:00 am at 11:00 am

Posted in Economics, Other stuff

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Unemployment rate rises to 14.7% in April.

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Shutting down the economy has predictable, expected consequences. One that became visible on Friday was 20 million jobs vaporizing in the last month which resulted in an expected soaring unemployment rate.

A ban on everything other than immediate emergency medical care has cratered revenue of hospitals bringing layoffs to the entire industry.

Finally, making unemployment benefits higher than the earning capacity of a large portion of people has the fully expected consequence of making people hesitant to return to work.

This discussion will be posted across several of my blogs.

5/8/20 – Wall Street Journal – April Unemployment Rate Rose to a Record 14.7% – Thirty-three million people filing a first-time claim for unemployment drove the unemployment rate to 14.7%. Oh, lots of those new claims were filed after the cutoff for the April calculations.

A staggering 20.5 million jobs disappeared. Article points out the number of jobs destroyed are equal to all the job gains over the last decade.

Picture it this way – that is the equivalent of everybody who found a job over the last decade getting laid off.

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Written by Jim Ulvog

May 9, 2020, 8:05 am at 8:05 am

Posted in Economics, Other stuff

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More big businesses failing. Revised budget forecast for state of California shows even governments are going to have a hard time when the economy is frozen. Maybe it is time to restart the economy.

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Even the state government in California may be starting to realize that putting the economy in a deep freezer for an extended and unknown period of time might have some adverse consequences.

Just a few of the business casualties over the last few days:

  • Neiman Marcus (bankruptcy filed)
  • Souplanation/Sweet Tomatoes restaurants (all 97 stores permanently closing)
  • Lord & Taylor (likely BK)
  • J. Crew (bankruptcy filed)
  • J. C. Penney (likely BK)

This discussion will be posted on several of my blogs.

California budget deficit

5/7/20 – ABC news – California doom: Staggering $54 billion budget deficit looms 

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Written by Jim Ulvog

May 8, 2020, 8:24 am at 8:24 am

Posted in Economics, Other stuff

3.2 million new claims for unemployment last week. Running out of negative words to describe the severity of job losses.

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Unemployment by Sean MacEntee is licensed under CC BY 2.0

New unemployment claims for week ending 5/2/20 are 3,169,000, seasonally adjusted.

The tally of new claims is 33.48 million since the economy was put in an induced coma.

That means about 1 out of every 5 people in the civilian labor force back in February are out of a job today.

I’m running out of words to describe how horribly the economy has been hit. Seem to have exhausted the adjectives that apply. We have a terrible mess and it is going to take a long time to fully recover from the lost jobs and even longer to recover consumer and business confidence.

This discussion will be posted across several of my blogs.

Data:

Expectations from economists interviewed by the WSJ, or perhaps we should say their wild guesses, are the flood of new claims will taper off in May. Will likely be months before the new jobs exceed the new unemployment claims. Will likely be years before new jobs offset the tidal waves of job losses in March, April, and May.

Summary of new claims and running total

I have prepared a running tally of the new unemployment claims, which is shown below.

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Written by Jim Ulvog

May 7, 2020, 8:20 am at 8:20 am

Posted in Economics, Other stuff

Economic devastation from shutdown spreads. Signs showing of deteriorating health and increased deaths caused by shutdown.

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Indications of damage caused by the shutdown are getting stronger. First articles are appearing to describe the harm to health from the shutdown.

Comments today:

  • Estimated 35 deaths from not getting cardiac care in Ontario, Canada
  • Indications people are not seeing doctors and not getting meds they need
  • Harsh impact on Jewish owned businesses
  • New vehicle sales collapsing
  • Temp layoffs transition to permanent
  • More students suing more universities, now claiming discount on tuition for missing out on the on-campus experience

Damage to health from shutdown

5/5/20 – Daily Wire – Dozens Dead After Lockdown Measures Delayed Their Heart Surgeries; Health Official: “Certainly Was Not Intended” – Count this as the first in what I predict will be an exquisitely long list of unintended consequences from putting the economy into an induced coma. The sad part is these unintended consequences were predictable and expected.

Thousands upon thousands of needed health procedures were canceled in Ontario, Canada in order to make room for the massive surge of coronavirus patients which never arrived.

New study in Ontario estimates that 35 people are dead because their heart surgeries were postponed. There were 12,200 surgeries and other procedures postponed each week.

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Written by Jim Ulvog

May 7, 2020, 6:05 am at 6:05 am

Posted in Economics, Other stuff

California starts first few steps to start opening up the stalled economy.

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Economic doors will start to open on Friday – Opening or closing? by Paolo Gamba is licensed under CC BY 2.0

Friday of this week, 5/8, California will take the first baby steps to revive the state’s economy. Some retail stores will be able to provide curb-side delivery of products.

I don’t quite know how many people will order clothes online in order to pick them up at a store’s curb, but that is a first step.

At least half the value of a bookstore is browsing the shelves to see what book you really have to read right but that you previously didn’t even know existed.

Well, it’s a baby step.

Several articles describe the beginning here in the state. First article describes that government officials better start opening up quick or they will find the everyone already has done so.

5/1/20 – Forbes – Apple Data Shows Shelter-In-Place Is Ending, Whether Governments Want It To Or Not – Apple and Foursquare are tracking data that show people are getting out more.

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Written by Jim Ulvog

May 6, 2020, 21:54 pm at 9:54 pm

Posted in Economics, Pondering

Three states tighten the shutdown while others start to revive their economy.

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Green line is the unemployment rate in every state of the country. Red line is the financial health of universities, restaurants, airlines, and every small business.  Sinkender roter und steigender grüner Pfeil symbolisieren das Auf und Ab des Aktienmarktes by Marco Verch is licensed under CC BY 2.0.

With extremely short notice, governors of Arizona and Tennessee extended the lockdown and economic shutdown in their states. California governor orders beaches closed in the county with lowest infection rate, leaving open beaches in county with three times higher rate.

Meanwhile, many other states are trying to allow their economies to re-start.

Arizona extends lockdown

4/29/20 – Fox 10 Phoenix – Gov. Doug Ducey extends Arizona’s stay-at-home order to May 15 – The shutdown and lock-in for Arizona was scheduled to expire in one day as the governor extended the economic catastrophe by 15 more days.

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Written by Jim Ulvog

May 3, 2020, 7:25 am at 7:25 am

Posted in Economics, Other stuff

Economic stats show rapid disintegration of economy. Collapse in physical and emotional health won’t be this easy to calculate.

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The economic statistics are rolling out to show the initial impact of the shutdown of the economy.

The collateral effect the shutdown and isolation will have on deteriorating emotional and mental health along with increased mortality due to postponed or canceled medical treatment will take years to quantify.

New stats in last few days:

  • 3.8 million new unemployment claims this week
  • New unemployment claims in six weeks are now equal to 18% of the people who were working in February
  • CBO expects unemployment rate to average 11% for 2020
  • 4.8% annualized drop in GDP for first quarter

New claims for unemployment

4/30/20 – Department of Labor – Unemployment insurance weekly claims – Another 3,839,000 people filed an initial claim for unemployment in the week ending April 25.

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Written by Jim Ulvog

April 30, 2020, 7:47 am at 7:47 am

Posted in Economics, Other stuff